Cummins Inc. (NYSE:CMI) — This manufacturer of truck engines, stand-by power equipment and industrial filters derives more than 50% of its sales from outside North America. This is felt by Standard & Poor’s to be an advantage because of the potential for Cummins to benefit from its leading-edge technology in truck engines.
They also point out that there is a pent-up demand for truck engines and generators.
The present U.S. government’s emphasis on infrastructure repair and building should provide a boost to construction-related companies, like Cummins. On May 2, CFRA (S&P) raised its opinion to a “Five-Star Strong Buy” with a 12-month target of $200 from $166, and raised their 2017 EPS estimate to $9.75 from $8.07 and their 2018 EPS estimate to $11 from $9.06.
It was pointed out that CMI’s Q1 EPS of $2.36 beat their EPS estimate of $1.80 on revenue growth, which was better than expected. CMI pays a dividend of $4.10, for a 2.6% dividend yield.
Since last May, CMI stock has traded within a powerful bull channel. The channel has averaged about 10 points from its support to resistance line, and volume has consistently supported upside reversals when needed, as in early November 2016 and April 2017.
Since early in May, volume has been consistently higher on up days.
It is likely that buyers will continue to support the 30-degree angle of the chart since MACD is currently slightly oversold. Thus traders should buy CMI at $155 with a target of $185 for a proposed short-term return of almost 13%. Long-term investors will probably benefit from S&P’s 12-month target of $200.
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